Uncertainty about May BoE Interest Meeting Leaves GBP/EUR Exchange Rate Steady
The Pound (GBP) has made little movement against the Euro (EUR) so far today, ahead of a key meeting of Bank of England (BoE) policymakers on Thursday.
Pound traders are uncertain about whether BoE officials will commit to higher interest rates this week and this uncertainty has limited GBP movement.
Eurozone Retail PMI Contraction Leaves Euro to Pound (EUR/GBP) Exchange Rate Steady
The Euro (EUR) has held close to opening levels against the Pound (GBP) today, following the news that Eurozone retail sector activity contracted in April.
The latest retail PMI figures showed a decline from 50.1 points to 48.6, which was worse than the forecast 49.6 point reading.
Looking at Germany’s contribution to Eurozone retail activity, IHS Markit Principal Economist Phil Smith said;
‘Retail sales growth remained subdued in April. While there was evidence of improved weather having driven spending after the snow disruption in March, payback from an early Easter had an offsetting effect and retailers generally noted lower-than-expected sales.’
Pound to Euro Exchange Rate Forecast: Are GBP/EUR Losses ahead on BoE Interest Rate Decision?
The main event for Pound traders this week will be the Bank of England (BoE) interest rate decision on Thursday.
Members of the Monetary Policy Committee (MPC) will be meeting to consider adjusting UK interest rates, but the current expectation is for no change from 0.5%.
A May interest rate hike seemed almost assured at the start of April, but since then poor UK data releases have caused analysts to rethink their forecasts.
No action from the MPC seems the most likely outcome, but some optimistic analysts still haven’t ruled out a surprise rate hike.
If policymakers do the unexpected and increase the BoE interest rate from 0.5% to 0.75%, the Pound to Euro (GBP/EUR) exchange rate could rally.
Conversely, despite being the anticipated outcome, another interest rate freeze from policymakers might lead to the Pound (GBP) sliding against the Euro (EUR).
Euro to Pound Exchange Rate (EUR/GBP) Volatility Predicted on New Italian Election
On the other side of the pairing, weekly Euro to Pound (EUR/GBP) exchange rate movement could be determined by any Italian political developments.
Following a general election in March that failed to provide an overall majority, a deadlock has left Italy without a functioning government.
Italian President Sergio Mattarella has said that the only solutions are another general election, or for a caretaker government to take over until 2019.
Neither option is ideal and the continued delay leaves the country without firm leadership.
If another election is called then the Euro (EUR) may decline against the Pound (GBP), over fears that Eurosceptic parties will end up taking power after a fresh ballot.
More concretely, European Central Bank (ECB) President Mario Draghi will be speaking on Friday and could trigger a Euro advance based on his remarks.
EUR traders will be looking for any signs that monetary policy tightening could take place in 2018, although recent tepid inflation data might prevent such comments.
